If you look at the numbers, China wants a 7 to 10% increase in GDP per year for the next ten years. The amount of raw materials they will need will drive the price of everything up. Oil will never be lower than $100 a barrel and more likely $200, Wheat, Corn, Copper, Phosphorous, all of these commodities will increase in price. China uses already 45% of all the coal, copper, iron and will be using the majority of oil soon. And this is not for export, it is just their own use. Why do the Chinese send so many people over seas looking for raw materials? Not to make iPads…
In the 'rich' world, we will be able to absorb these costs to a certain extent, but poor countries will collapse. As Grantham says, your grandchild will live in a hell, maybe your children will not starve. An increase in wheat or corn prices of just 10 or 20% will cause wide spread hunger in poor countries, and there is no happy pill to take to fix it. Reducing the world population is the only answer, no more 2 or 3 or 4 kids. It is sad and frightening and most people will just turn away and not listen, just put a bag over their head so they will not see the train about to crush them.
Numbers don’t lie.
Here is an excerpt about the national debt and why it's not an appropriate focus:
"What it does is it distracts us from the real world," he tells Charlie Rose.
The economy is extremely difficult. The debt, in the long run, is not as significant as people think. How you manage debt is an art form. Whether you do it this year or next year, whether you spread these things out, how high is too high – I have not spent my career on those areas.
I feel – I guess – that it's substantially too high. I guess that you shouldn't try to make it low in a hurry, but you should have a 20-year plan to chip away.
We've gotten ourselves into a bit of a rathole, and we should be careful getting out of it, but it is not the overwhelming thing that will dominate our future.
What it does is it distracts us from the real world. Debt is an accounting world. It's paper. The real world is the quantity and quality of your people and the quantity and quality of your capital spending.
Are you building new machines? Are you being inventive? Are you training your people? Is your high school system delivering the same education that it used to relative to the South Koreans and relative to the Norwegians?
No, it's not.
We should worry more about the real world and less about the paper world. And somehow we're in this death grip that only paper things matter. And so there's much too little attention spent on education, training, capital spending – finding a way to beef it up.
And also, I'd rather stimulate the economy directly through government spending than I would like to play games with the monetary system and games with the interest rate, inflicting great wounds on retirees and so on, and transferring wealth to people who won't spend it.
We're transferring wealth from the poor to the rich by keeping interest rates low. I'm not even sure the economy gains at all by a low interest rate, and furthermore, no one has established convincingly that it's a good idea.
It's a tradition that it's a good idea. And that's not the same. We've had lots of traditions, like that the market would look after itself – that people wouldn't be crooks because economic theory assumes that they're not.
But they often were crooks, and greedy, and short-term oriented, and willing to dance until the music stopped – although, as Soros said, the music had actually stopped long before.
He goes on to add that “it is quickly apparent that capitalism in general has no sense of ethics or conscience. Whatever the Supreme Court may think, it is not a person,” and, “It gets worse, for what capitalism has always had is money with which to try to buy influence. Today’s version of U.S. capitalism has died and gone to heaven on this issue.” But “of all the technical weaknesses in capitalism, though, probably the most immediately dangerous is its absolute inability to process the finiteness of resources and the mathematical impossibility of maintaining rapid growth in physical output.”
Well, time marches on and it’s going to be hard to have a workers’ revolution with no workers. Organizing robotic machine tools will not be easy. However, Marx and Engels certainly got the part right about globalization and the supranational company increasing the power of capital at the expense of labor. To interfere with Marx’s apocalyptic vision, we need some enlightened governmental moderation of the new globalized Juggernaut (even slightly enlightened would be encouraging) before capitalism gets so cocky that we have some serious social reaction.
He finishes by saying that “capitalism does admittedly do a thousand things better than other systems: it only currently fails in two or three. Unfortunately for us all, even a single one of these failings may bring capitalism down and us with it.”
Grantham says capitalism does almost everything better than any other economic system. It’s just that its two or three main flaws are potentially fatal and have gone largely unaddressed. A sustainable economic system, for instance, can’t be based on ever-increasing debt, corporations can’t be allowed to run governments and loot treasuries, and “growth at any cost” is a recipe for planetary suicide.
Here are some of Grantham’s finer points:
• Capitalism too heavily discounts the future value of cash flows as it seeks to raise debts: “Your grandchildren have no value.”
• Companies foolishly reward executives for taking on debt: “Total remuneration ... for senior officers ... rose as a percentage of the average worker’s pay from 40 times in Eisenhower’s era to over 600 times today with no indication of any general improvement in talent.”
• It’s about profit, not people: “Capitalism in general has no sense of ethics or conscience. Whatever the Supreme Court may think, it is not a person.”
• The more people borrow, the more they just gamble: “Leverage ... increases your returns over and over until, suddenly, it ruins you. ... There are no Investors Anonymous meetings to attend.”
• This time, it’s not so different: “Ignore the ... inevitable cheerleaders who will assure you that this time it’s a new high plateau ... even if that view comes from the Federal Reserve itself. No. Make that, especially if it comes from there.”
• Washington is becoming a corporate subsidiary: “What capitalism has always had is money with which to try to buy influence. ... The issues they influence are precisely ... the ones that are most important to society’s ... very existence.”
• Big companies can’t help it: “Ethical CEOs can drag a company along for a while, but this is an undependable and temporary fix.”
• Economic theory ignores natural laws. It suffers an “absolute inability to process the finiteness of resources. ... Capitalism wants to eat into ... limited resources at an accelerating rate with the subtext that everyone on the planet has the right to live like the wasteful polluting developed countries do today.”
• It’s not just inexpensive oil we are running out of: The “loss of our collective ability to feed ourselves, through erosion and fertilizer depletion — has received little or no attention.”
• Americans are too optimistic: “They adopt a hear-no-evil approach to life and listen exclusively to good news. ... There are always a few experts lacking in long-horizon vision, simple common sense, or whose co-operation has been rented, like “expert” witnesses at a murder trial, who can be dragged out to reliably say that everything will always work out fine.”
• Governments must step in. “To interfere with Marx’s apocalyptic vision, we need some enlightened governmental moderation ... before capitalism gets so cocky that we have some serious social reaction.”
• Where Marx and Engels got it wrong was in thinking workers would unite. “It’s going to be hard to have a workers’ revolution with no workers. Organizing robotic machine tools will not be easy.”
The economy is extremely difficult. The debt, in the long run, is not as significant as people think. How you manage debt is an art form. Whether you do it this year or next year, whether you spread these things out, how high is too high – I have not spent my career on those areas.
I feel – I guess – that it's substantially too high. I guess that you shouldn't try to make it low in a hurry, but you should have a 20-year plan to chip away.
We've gotten ourselves into a bit of a rathole, and we should be careful getting out of it, but it is not the overwhelming thing that will dominate our future.
What it does is it distracts us from the real world. Debt is an accounting world. It's paper. The real world is the quantity and quality of your people and the quantity and quality of your capital spending.
Are you building new machines? Are you being inventive? Are you training your people? Is your high school system delivering the same education that it used to relative to the South Koreans and relative to the Norwegians?
No, it's not.
We should worry more about the real world and less about the paper world. And somehow we're in this death grip that only paper things matter. And so there's much too little attention spent on education, training, capital spending – finding a way to beef it up.
And also, I'd rather stimulate the economy directly through government spending than I would like to play games with the monetary system and games with the interest rate, inflicting great wounds on retirees and so on, and transferring wealth to people who won't spend it.
We're transferring wealth from the poor to the rich by keeping interest rates low. I'm not even sure the economy gains at all by a low interest rate, and furthermore, no one has established convincingly that it's a good idea.
It's a tradition that it's a good idea. And that's not the same. We've had lots of traditions, like that the market would look after itself – that people wouldn't be crooks because economic theory assumes that they're not.
But they often were crooks, and greedy, and short-term oriented, and willing to dance until the music stopped – although, as Soros said, the music had actually stopped long before.
He goes on to add that “it is quickly apparent that capitalism in general has no sense of ethics or conscience. Whatever the Supreme Court may think, it is not a person,” and, “It gets worse, for what capitalism has always had is money with which to try to buy influence. Today’s version of U.S. capitalism has died and gone to heaven on this issue.” But “of all the technical weaknesses in capitalism, though, probably the most immediately dangerous is its absolute inability to process the finiteness of resources and the mathematical impossibility of maintaining rapid growth in physical output.”
Well, time marches on and it’s going to be hard to have a workers’ revolution with no workers. Organizing robotic machine tools will not be easy. However, Marx and Engels certainly got the part right about globalization and the supranational company increasing the power of capital at the expense of labor. To interfere with Marx’s apocalyptic vision, we need some enlightened governmental moderation of the new globalized Juggernaut (even slightly enlightened would be encouraging) before capitalism gets so cocky that we have some serious social reaction.
He finishes by saying that “capitalism does admittedly do a thousand things better than other systems: it only currently fails in two or three. Unfortunately for us all, even a single one of these failings may bring capitalism down and us with it.”
Grantham says capitalism does almost everything better than any other economic system. It’s just that its two or three main flaws are potentially fatal and have gone largely unaddressed. A sustainable economic system, for instance, can’t be based on ever-increasing debt, corporations can’t be allowed to run governments and loot treasuries, and “growth at any cost” is a recipe for planetary suicide.
Here are some of Grantham’s finer points:
• Capitalism too heavily discounts the future value of cash flows as it seeks to raise debts: “Your grandchildren have no value.”
• Companies foolishly reward executives for taking on debt: “Total remuneration ... for senior officers ... rose as a percentage of the average worker’s pay from 40 times in Eisenhower’s era to over 600 times today with no indication of any general improvement in talent.”
• It’s about profit, not people: “Capitalism in general has no sense of ethics or conscience. Whatever the Supreme Court may think, it is not a person.”
• The more people borrow, the more they just gamble: “Leverage ... increases your returns over and over until, suddenly, it ruins you. ... There are no Investors Anonymous meetings to attend.”
• This time, it’s not so different: “Ignore the ... inevitable cheerleaders who will assure you that this time it’s a new high plateau ... even if that view comes from the Federal Reserve itself. No. Make that, especially if it comes from there.”
• Washington is becoming a corporate subsidiary: “What capitalism has always had is money with which to try to buy influence. ... The issues they influence are precisely ... the ones that are most important to society’s ... very existence.”
• Big companies can’t help it: “Ethical CEOs can drag a company along for a while, but this is an undependable and temporary fix.”
• Economic theory ignores natural laws. It suffers an “absolute inability to process the finiteness of resources. ... Capitalism wants to eat into ... limited resources at an accelerating rate with the subtext that everyone on the planet has the right to live like the wasteful polluting developed countries do today.”
• It’s not just inexpensive oil we are running out of: The “loss of our collective ability to feed ourselves, through erosion and fertilizer depletion — has received little or no attention.”
• Americans are too optimistic: “They adopt a hear-no-evil approach to life and listen exclusively to good news. ... There are always a few experts lacking in long-horizon vision, simple common sense, or whose co-operation has been rented, like “expert” witnesses at a murder trial, who can be dragged out to reliably say that everything will always work out fine.”
• Governments must step in. “To interfere with Marx’s apocalyptic vision, we need some enlightened governmental moderation ... before capitalism gets so cocky that we have some serious social reaction.”
• Where Marx and Engels got it wrong was in thinking workers would unite. “It’s going to be hard to have a workers’ revolution with no workers. Organizing robotic machine tools will not be easy.”
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